U.S. economy on track to sustain growth in 2018

The U.S. economy appears to be on track to sustain economic growth into 2018 based on insights from the latest GDP data through the fourth quarter of 2017.

The outlook is particularly encouraging given the latest uptick in the data excluding inventory buildups, according to the inflation-adjusted (i.e., real) data from the U.S. Bureau of Economic Analysis:

Topline GDP. Total GDP growth quarter-to-quarter slowed to a 2.6% annualized rate in the fourth quarter from 3.2% in the third quarter. This apparent letup hides some positive signs, including an acceleration in consumer spending to a 3.8% annualized gain.

Excluding inventory buildups. Positive signs emerge more clearly when inventory buildups are excluded from the investment component of the economy. Excluding the inventory changes, the economy accelerated to a 3.3% annualized gain in the fourth quarter.

Outlook. The investment pickup is likely to be sustained in 2018 as the benefits from federal tax changes kick in. This should result in continued strength in the job market, which will in turn sustain healthy consumer spending.